The International banking crisis still casts a shadow over the economy. Only this week Prime Minister David Cameron announced measures designed to curb fat cat pay rises and promised he would consider others to punish negligent bankers. In the meantime the banking sector is facing its biggest shake-up in decades with a host of take-overs in the pipeline and the high street commercial property merry-go-round in full swing.
As far as the public is concerned bankers lie somewhere between phone-hacking journalists and greedy politicians in the league table of least trustworthy professionals. As a result few will shed a tear over their current difficulties. But when the dust settles after the latest round of disposals and acquisitions, the presence of Richard Branson will ensure there is at least one popular figure in the banking sector.
This month Virgin Money formally completed its £747 million takeover of Northern Rock, the bank whose collapse and bail-out signalled the beginning of the banking crisis in the UK, in 2007. This week Branson has been visiting some of Northern Rock’s 75 high street commercial property branches to reassure the 2000 staff. He has also spent time discussing his plans at Virgin Money offices in London. He has stated that the financial products offered by the new venture will be “simple and transparent.”
The Virgin Money move into high street banking comes as others seek to break into the sector amid the current shake-up. Metro Bank currently has 10 branches in commercial properties and intends to launch 16 more this year. A financial analyst told the Observer that a factor motivating the new high street players is a desire to fill a gap left by the so called Big Five catering for small and medium enterprises (SMEs). This will come as good news to those who have felt let down by the banks in recent times.
Meanwhile the traditional big names on the high street are engaged in a round of disposals forced on them by EU competition authorities. Lloyds TSB is currently in the process of disposing of 632 of its branches. This includes all of its high street commercial properties in Scotland and a selection of branches in England and Wales. The banking group, which is still 41% owned by the taxpayer, has named the Co-operative Bank as its preferred bidder. If the deal is approved it is hoped it will be concluded during the first financial quarter of this year making the Co-Operative Bank the seventh largest in the UK.
The Royal Bank of Scotland has recently completed a similar EU mandated deal with Santander involving the sale of over 300 branches from its commercial property portfolio. In addition Tesco has been exploring the possibility of launching a full scale banking business for some time. If the supermarket goes ahead with its plans it is not clear if this will involve the acquisition of additional commercial property or whether the branches will operate within its stores. Even so, a banking expert warns all the newcomers that it won’t be easy establishing their new banks. Sounding a note of caution, he warns; “There is a huge regulatory framework and an infrastructure you’ve got to have in place….It takes time.”
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